Bilked Investors File Suit * 30 Who Lost To Richard Line Seek Money From His Affiliates.

September 26, 1997|by LAURI RICE-MAUE, The Morning Call

They don't expect to recover any of their money from financial planner Richard J. Line, who faces possible jail time for bilking them of more than $1 million.

So 30 people, mostly from the Lehigh Valley, are going after Line's associates and his affiliated financial firms instead.

On Thursday, their lawyer, Peter J. Karoly, filed a lawsuit in Northampton County Court.

The victims, the majority of whom were parents looking to finance their children's college educations, had consulted with Line, who had an office in Hanover Township, Lehigh County, from 1989 to 1995.

Line faces sentencing Nov. 17 in U.S. District Court in Allentown on criminal charges for the scheme, through which he bilked more than $2 million from about 40 families. Not all the families are involved in the lawsuit.

Karoly said that Line advised them to take out home equity loans and give him the money to invest in annuities and securities through the brokerage investment firm, the Copeland Companies, 2 Tower Center Blvd., East Brunswick, N.J.

Karoly, who prepared the lawsuit with attorney Edward Eidelman, said Copeland licensed Line to sell its investment products.

Line promised his clients that the returns on the investments would enable them to pay the home equity loans as well as their college costs at the end of four years, said Karoly.

Line, who has filed for bankruptcy, has no assets and no insurance, Karoly said.

In addition to allowing Line to act as its representative, Karoly said, Copeland failed to monitor and regulate his actions.

Line's clients, said Karoly, deposited their money with him in the belief that they were investing with Copeland, and they did so based on Copeland's reputation.

Donna Webber, assistant general counsel for Copeland, said she had not seen the lawsuit and could not comment on it.

Hansen, Mayberry and Kemmerer acted with Line to encourage and induce the clients to take out loans on their homes in the scheme, the suit says. By doing so, they had less disposable income, which made them eligible for more financial aid than they would have been otherwise.

According to the suit, Line referred his clients to Mayberry for their home equity loans.

"Jennifer Mayberry knew exactly what Richard Line was doing," said Karoly. "She was engaging in fraudulent conduct and furthering the scheme of Richard Line. She would lie and encourage the loan applicants to lie on their mortgage applications as to the purpose of the loan. She told them to say it was a home equity loan for home improvements."

Shanlin Cheng, owner of Hansen, said her company was not involved in any wrongdoing. Mayberry, said Cheng, worked through Hansen as a self-employed loan officer before resigning two years ago.

"We are not responsible for any loan officer, and we don't even know this gentleman (Line)," Cheng said.

Kemmerer, who had been a business partner of Line's, would prepare income tax returns based on documentation provided by Line's clients from Mayberry and Hansen.

Karoly said Kemmerer was aware that the clients could not borrow money for the investments and that the tax returns were going to be used in applications for financial aid and that they were fraudulent.

Kemmerer, says the suit, knew that money invested in Copeland would generate income that would have to be disclosed and taxed. But he never requested documentation of the investments from the clients or Copeland because he knew the investments weren't being made.

Karoly said Line conducted the settlements with Mayberry and Kemmerer -- over coffee in the clients' homes -- so that the three of them could keep control over any questions that may have come up.

Neither Mayberry nor Kemmerer could be reached for comment.

The suit, which seeks compensatory as well as punitive damages, said the defendants violated various state and federal securities laws, including the Unfair Trade Practices and Consumer Protection Law.

Plaintiffs in the lawsuit and the amount of money they gave Line to invest are: